Nirav scam limited to one branch, PNB chief tells MPs

Managing director of Punjab National Bank (PNB) Sunil Mehta on Monday told parliamentarians that there was no systemic failure in the Nirav Modi fraudulent Letters of Undertaking case, terming it as just ‘operational failure’ of a single branch of the bank in Mumbai.

Mr. Mehta and the Deputy Chairman of Indian Banks’ Association (IBA) and Chairman of State Bank of India Rajnish Kumar were questioned on the PNB scam and the issue of conflict of interest involving ICICI CEO Chanda Kochhar at a three-hour meeting by members of the Parliamentary Standing Committee on Finance. The panel is chaired by Congress MP M. Veerappa Moily.

Nirav Modi, along with his uncle and co-accused Mehul Choksi, defrauded the PNB of over ₹13,500 crore. The fraud was committed at the Brady House branch of the bank in Mumbai. Three PNB officials are among 19 persons arrested so far.
According to sources, BJP members on the panel — Nishikant Dubey and Kirit Somaiya — raised questions on how the bank allowed such a massive fraud to go undetected.
Sources said another member questioned Mr. Mehta’s explanation and asked whether the bank allows branches to deal with such huge amounts without the supervision of its board.

Mr. Mehta, in his response said no credit was given, only LOU (Letter of Undertaking), was issued to him [Nirav Modi]. And the fraud could not be detected because it went through the fast approval system.

Mr Mehta termed it as an “operational failure” of a single branch, sources said.

TMC MP Saugata Roy questioned the IBA on the issue of ICICI bank CEO Chanda Kochhar who has been accused of conflict of interest. Ms Kochhar has been accused of favouring the Videocon Group which had business dealings with NuPower Renewables owned by her husband Deepak Kochhar. ICICI bank is a member of IBA.

Mr Roy questioned the Association’s silence on the conflict of interest issue and asked how such a violation of code of conduct went unnoticed.

According to the sources, Mr. Rajnish Kumar of the IBA did not answer his questions.
The parliamentarians also grilled the IBA on the growing non-performing assets. Gross NPAs of state-owned banks had crossed ₹7.77 lakh crore at the end of December 2017. According to sources, former Railway Minister and TMC MP Dinesh Trivedi said the credibility of banks was is now at stake.

Sources said, he asked the IBA on whether the banks were working independently of the government of the day. “Are you responsible to the government or to people? And what exactly is the reason for NPAs — is it only fraud or a change in government policies,” he asked, according to other members who attended the meeting.

Former, Prime Minister Dr Manmohan Singh who was present in the meeting reportedly did not ask any questions.